Subjects

Sunday, January 6, 2013

Maybe You Live Too Long?

Changing Actuarial Demographics

The oldest individual in Illinois passed away last Monday in
the East St. Louis area of Illinois. An
announcement came on Saturday, coincidentally, while in Chicago the state House
and Senate leadership came to an impasse regarding what to do about breaking
earlier promises of benefits to Illinois’ public sector workers. This includes the COLA, which remains a
particularly sticky problem for the lawmakers who realize the likelihood or
possibility of unfavorable litigation if they alter (i.e., diminish or impair)
the benefit.

Mayette Epps-Miller, born on April 15, 1901, was 111 years
old. Identified in surveys of the
elderly as a “supercentarian,” one who lives beyond 110, Mayetta was considered
by her remaining family to have been the “rock…who pulled everyone together” (http://www.daily-chronicle.com/2013/01/06/east-st-louis-woman-dies-at-111/aupdc7e/). Such an obituary would leave most of us smiling
for the lady. You go, Mayetta. On the other hand, if you are a lawmaker in
Illinois, this is as frightening as a constituency version of “The Walking
Dead,” except the zombies are feasting on dollars. Never mind that the dollars were owed them to
begin with.

Talk to any legislator in Illinois, he or she will be quick
to remind you that we are living too long now.
They say that such changing actuarial demographics make the continued
payment of benefits into later years impossible or injurious to payments to
later public sector workers. Of course, an
Illinois legislator won’t tell you that the real issue is the colossal sums money
diverted for nearly half a century, funds owed but not paid to public sector
workers.

Nevertheless, while they would be right to remind that we
are living longer than before, that also creates an even greater need to
maintain the compounded COLA. Life expectancies are at an all time high
according to the Center for Disease Control and Prevention – 76.5 in 1977 to
77.9 in 2007. The downside is that
living longer does not necessarily mean living better. The Lancet Journal of Medicine is carrying a
study by the Global Burden of Disease Study, considered one of the most
comprehensive studies in the history of medicine, which indicates medical
expenses in extended life scenarios may be significantly more. Despite the scourge of diabetes, etc., we
continue to live longer and pay more – for medical care.

Of
course the compounded cost-of-living adjustment is not a means to get wealthy
after retirement, unless you of course are raking in more than$25,000
(according to Rep. Kelly Cassidy). The real
concern with inflation is not increasing your standard of living. Instead, it's
about maintaining it. “For example, assuming a modest 3% inflation rate, your
income would need to increase over 80% from age 65 to age 85 just to retain the
same standard of living. If inflation were 4%, your income would have to more
than double over those twenty years”

Let’s
be honest. In Illinois, where morality
is moot, no argument to preserve a compounded COLA is going to receive any
serious consideration by our politicians.
The only preventative keeping Nekritz, Biss, Cross, Radogno, Madigan and
Quinn from simply swiping it all away is the foresight of Helen Kinney and
Henry Green who gave us a pension protection clause in 1970.

And
Mayetta? Sometimes the view changes when
we look the other way back through telescope.
Let’s say she was a teacher, just for speculative purposes. In 1950, when she might have retired, she
would have been making about 75% of her final average salary, which would have
been around $4500 annually. With a
compounded COLA (which of course did not start until we all began paying for it
in 1990), she might have been receiving $11,009.38 (http://www.online-utility.org/math/compound_interest_calculator.jsp?principal=3375&years=40&interest_rate=3). With the “new math” provided by Rep. Cassidy,
it would be $3625 this last year.

About Me

I am a retiree, political activist, social advocate and community volunteer. I taught at Lyons Township High School in LaGrange for 34 years in the Language Arts classroom and worked as an administrator for several years. My current avocations include various community outreach and assistance programs. Having benefitted from employment in a collegial, reflective teaching environment that encouraged dedication and professionalism, I continue to seek the promotion of education at all levels as a long-term effort combining talent, perseverance, commitment, and constant professional growth - not a blind adherence to a business model of measured production.

Copyrights & Fair Use

This blog contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. I am making such material available in my efforts to advance understanding of issues vital to a democracy. I believe this constitutes a “fair use” of any such copyrighted material as provided for in section 107 of the U.S. Copyright Law.